Job Classification

What is Job Classification?

Job classification is what a system is called that is designed to classify all jobs within a company and put them in a standardized scale based on the overall tasks, responsibilities, pay level, and duties associated with a specific job. Grades or job classification levels are often assigned to each job so that it can be properly organized and categorized within the company.

Although job classifications structures vary with different businesses, the overall goal is to determine job responsibilities accurately. This also helps companies compare similar jobs in different companies within their industry. Thus, a job classification system does not take into account the skill level and ability of someone currently in that position, as much as it looks at the skills and abilities needed for the position.

For example, the Hay System is a popular job classification method and can help to understand job classifications better.

The Hay System uses three components to classify jobs:

• The knowledge required to do the job
• The problem solving required for the job
• The accountability required for the job

This framework offers a job standard across a company and helps to determine possible needs. It makes sure that each job is being compensated fairly based on the responsibilities of that job and the responsibilities of jobs similar to it.

What Does Job Classification Mean?

Job classification is created to help determine what a job does for a company. It can be used for performance reviews, job listings, and determining if there is any responsibility overlap between jobs in the company. The job classification structure is meant to create standardization across a company and industry and is meant to be a tool to make sure you know what responsibilities are being determined within your business.

Why is Job Classification Important?

Aside from providing clear expectations and duties for each employee, job levels are also important for recruiting purposes. Prospective employees often avoid applying for jobs with descriptions and titles that seem too ambiguous, as it's difficult for them to tell exactly what qualifications they need or what would be expected of them on a daily basis. Having clearly defined job seniority levels within your company, and showing that in your job postings, can help you recruit employees that are the right fit.

Additionally, job levels can help organizations structure a logical compensation system. A detailed job level structure can ensure that employees at the same level receive the same compensation, helping to eliminate pay discrepancies among employees of different genders or races. First-year entry-level employees should be compensated close to the same amount, unless they have other obvious additional qualifications that merit additional pay. This reduces the likelihood of employees seeking employment elsewhere.

High job turnover can be a major financial loss for organizations large and small, as recruiting and training costs are effectively wasted if an employee only sticks around for a few months. It's almost always in a company's best interest to try to train new employees in a way that makes them feel prepared to handle their job description tasks, and to give them plenty of reasons to want to stay with the company.

An organized job level structure can also help employees envision their future with the company. If they can see possible advancement opportunities as they gain experience with your company, chances are higher that they will want to stick around. It is nearly always cheaper to hire current employees for higher-up positions than to recruit people from outside of the company, and employees that have worked in other jobs in the organization have a better understanding of how the company operates.

Then the question is if your company and teams are equipped to communicate different job levels and bands to your employees and establish a transparent compensation philosophy.

Job Classification Advantages and Disadvantages

One of the job classification advantages is that similar jobs can be classified and grouped together. This can help to streamline workflow and see if any groups’ tasks can be compartmentalized within the company. This can help create a broadband pay structure, meaning that pay grades are consolidated into fewer pay ranges. However, pay ranges that are wider, give an employer the ability to offer pay increases to their employees without having to promote them. This is only possible when an employer knows the jobs that are being performed within their company under a job classification method.

A disadvantage of job classification is that data pools are small because they only apply to the company that created them. This means whenever companies create a new job, the only thing you have to compare it to is the other jobs that already exist within the company. Every job would have to be reevaluated for each newly created job. Because people are heavily involved, job classification judgments are subjective to the person evaluating the job, who may misunderstand the merits and importance of a specific job. It can be useful to have someone doing the job to write up a description of the skills they use and the duties they perform in order to gain a better understanding of what the job entails.

What Are Job Levels?

Most organizations are intuitively structured using a chain of command that relies on employees of all different levels and status within the company. Organizations that clearly define their employees' titles and job levels often perform better than those with a loose job level and title structure, as employees with defined titles better understand the role they serve in a company. Some companies try to avoid placing labels on their employees' titles to seem forward-thinking, but this can lead to disastrous results when expectations are not properly outlined.

According to the Society of Human Resources Management (SHRM), using a job leveling system can help employers and employees more accurately value the positions within the company. This can help employees ensure they are being compensated fairly, and it can help employers train their employees more consistently and avoid confusion about who should be doing what.

Having a clear job level structure within your company can also make designing compensation plans far less of a headache. Learn more about job levels, how to implement them, and how they can help your compensation plans be more successful below.

Although no two companies operate in exactly the same way, there is a general framework that most professional organizations follow regarding the basic job grade levels. The most common job title levels within a company include:

Entry-Level

Also known as an associate, entry-level professionals tend to have little relevant experience when joining a team. Entry-level professionals are expected to work under close supervision and focus on professional development. These workers usually possess some level of higher education or work experience, but it depends on the company's hiring policies.

Individual Contributor

Sometimes called intermediate-level employees, individual contributors are granted more autonomy and work independently with some supervision. These employees typically possess at least two years of professional experience, and they can help to train and guide entry-level employees.

Senior Contributor

Senior contributors can handle the full range of tasks within their job description with minimal intervention, and they rarely require oversight or interventions from higher-ups. These professionals can manage large projects on their own, mentor lower level employees, and influence company-wide policies and procedures. Senior contributors usually have at least five years of professional experience, and some also have an advanced degree.

Manager

Managers supervise entry- or intermediate-level employees on a regular basis, and they provide training and support to help staff analyze and resolve issues. These professionals are responsible for high-level thinking and delegation, and they focus some of their time and attention on decision-making that may affect the company and its employees.

Director

Directors are often thought of as supervisors for the managers within a company, and they have a large influence on creating and administering policies and programs throughout an organization. Directors usually report directly to vice presidents or executives, and they often weigh in on important business decisions made by higher-ups.

VP/Executive

Vice presidents or executives are typically the highest level employees in a company. These professionals hold the most experience and a firm understanding of how the company operates and relates to other businesses and the community. The main job of executives is to make big decisions that impact the trajectory of the company as a whole.

Other Job Classification Structures

Many companies prefer to follow a similar format to the one outlined above, though they may choose more creative titles for their employees at each level. Other companies instead use a tiered structure, where employees of different titles are grouped together in tiers. For example, a university may place their entry- and intermediate-level employees in Tier 1, while supervisors and managers are placed in Tier 2. Perhaps the university would even decide to have a third tier for executives and other higher-ups.

In some companies, tiers are also used to determine compensation. Perhaps Tier 1 employees can get raises over the years, but they may have a salary ceiling of $30 per hour. In order to get another raise, they may have to be promoted to a Tier 2 employee and serve as a manager.

There are several ways your company can design its job classification structures, and there are pros and cons to each option. It may take some trial and error to determine which system works for you, but defining job levels is important for nearly any type of business.

How to Implement Job Levels

When the time comes to change, or better define, job levels within your company, there are a few key steps you should take:

• The first is assembling a team of human resources professionals and other leaders within the company to help you design a new structure. It can also help to get input from entry-level and mid-level employees, which can be done by sending out surveys or conducting interviews.
• Next, you must take a look at how the organization currently operates as a whole. Even if your company has yet to label certain levels, there is likely an informal hierarchy that already exists. By observing and studying how the company already structures itself, you can gain valuable insight into what currently works and what changes should be implemented.
• From there, most HR professionals look at and revise one job title or level at a time. Some find it easier to start at the entry-level positions and work up to the executive level, while others prefer to do it the opposite way. Either way, make sure that subsequent levels connect in a logical manner, so that employees will be able to clearly understand who they should report to and what a career path in their sector may look like.

Once you have drafted a new level system using the above steps, it's imperative that you seek feedback from other professionals in the organization. This feedback should come from people at the highest levels and potentially from stakeholders. It also never hurts to ask mid-level managers, and even some intermediate-level employees for their feedback. Take their opinions seriously, and make as many revisions as necessary before you and your organization are satisfied with the new structural outline.

With your job level structure in place, you can begin to analyze information you’ve tracked to understand how much you are paying within certain levels and bands in your organization. You can also use real-time compensation data to help you layer that information to benchmark if your offering is competitive in the market. Then, because you're benchmarking your own team’s information, the levels and bands data, you now have actionable data to make informed pay decisions.

Furthermore, the insights and data will enable you to make competitive offers to candidates, while also allowing you to communicate compensation philosophy more transparently with existing employees.

Structure Helps Your Job Classifications Succeed

It can feel overwhelming to overhaul your existing job classification structure, or to simply tweak it here and there, but making a few intentional and logical changes to the employee level structure can make a world of difference throughout the whole organization.

Employees will feel more confident that they are being fairly compensated, they will have a better understanding of what is expected of them. Plus, they may begin to try to level up within the company.

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